Energy and the economy:From now on our energy and food bills will take an increasing chunk of our incomes, writes economist Richard Douthwaite.
When the US cyclist Floyd Landis was accused of taking a performance-enhancing drug after winning the 2006 Tour de France his supporters pointed out that his performance had not been exceptional. He had, they said, delivered an energy output of only 280 watts for the five hours of his winning ride, whereas he had averaged 320 watts for six hours in training.
Drug-assisted or not, Landis is a superb athlete. A normally-fit man would be doing well to produce 75 watts an hour, or about three kilowatt-hours (kWh) in the course of a 40-hour working week. As electricity now costs 14.5 cents per kWh, including VAT, the energy value of a week of hard human labour is about 45c, or just over 1c an hour. A litre of petrol has an energy content of 8.9kWh and is, therefore, equivalent to three weeks' manual work. Yet it is priced at only about €1.04, including lots of duty and tax.
The gulf between the cost of human energy and that of the fossil variety explains why employers have spent so much time over the years searching for ways to use less of the former and more of the latter. The substitutions they have made have given an enormous boost to the productivity of the workers they employ, and some of the benefits of this have been passed on in higher wages.
In fact they have generated a virtuous circle, with the higher incomes produced by the extra productivity making fossil energy even more affordable, and thus more attractive to use. Swedish figures show that between 1920 and 1970 the length of time it took the average worker to earn enough to buy a kilowatt-hour fell from about 400 seconds to 25.
In minutes of work, the price of other goods and services has fallen, too, reflecting the extent to which it has been possible to use the increasingly cheap energy to provide them. So, for example, the price of a 1.3kg chicken in the US fell from 157 minutes' worth of work in 1920 to 14 minutes in 1997. Eggs took a sixteenth of the time to earn in 1997, sugar and bacon a sixth and milk and beef a fifth in comparison with 1920.
These falls forced farmers to increase their personal output, and thus the size of their operations, just to keep their incomes in line with those of everyone else. Millions of people who once would have worked the land became surplus to requirements in the countryside and drifted into the towns, searching for ways to support themselves. The world's megacities were born.
The price falls also meant that people had to spend a smaller and smaller proportion of their earnings on fuel and food. This allowed an increasing amount of discretionary spending and created the space in which a consumer society could develop.
The average Irish family now spends about 20 per cent of its income on food and only 3.8 per cent on energy for heating, cooking, lighting and all its electronic gadgets. As a result it has 75 per cent of its after-tax earnings left for such things as transport (16.4 per cent), services of all sorts (25.7 per cent) and renting or buying a house (9.6 per cent).
The adoption of industrial methods has meant that it now takes a surprising amount of energy to produce a person's food. A Swedish researcher, Folke Günther, has estimated that, on average, one unit of fossil energy is required to produce one unit of energy in the food, and then 10 units of fossil energy to process, pack and transport that food to the consumer. As the average person needs 1,000kWh of food energy in a year, a family of four requires the use of about 44,000kWh of fossil energy to produce its food supply. As a result, Günther argues that there is far greater potential for a family to save energy by buying locally grown, organically produced food than by scrapping its car or ceasing to heat its house.
As the cost of fossil energy rises as a result of oil and gas depletion, the cost of the 44,000kWh will go up, too, and, quite soon, families will find that switching to organic produce is the sensible thing to do, because, provided it is local, it will cost no more than the conventionally grown kind. The prices of conventionally grown cereals are already shooting up. US corn and wheat prices have both increased by about 50 per cent since September, and they are currently trading at prices higher than they have been for 10 years.
It is not just the extra cost of the energy used to grow crops that is responsible for this rise. Another factor is that increasing amounts of food are being burned as fuel. This makes sense. If wood pellets for your stove sell at €160 a ton in Ireland and barley can be had for €108.50, why not burn barley? "The Envirotec Corn Stove can heat your home safely and efficiently for a bushel of corn per day," says a Canadian website, and, throughout North America, corn-stove makers are struggling to keep up with demand.
But people burning food to heat their homes are still doing very little to reduce the global food supply in comparison with the firms turning wheat and corn into alcohol to be added to petrol. In the middle of last year, at a time when world grain stocks were at a 30-year low, the US was using 20 per cent of its corn crop to produce alcohol in 97 plants and had another 44 plants under construction. In Europe, 60 per cent of the rapeseed crop already goes to produce biodiesel.
Put starkly, the rich are buying up food to run their cars at the expense of the world's poor. What will happen to the millions living on less than $1 a day now that their food costs are beginning to rise? In the long term we can expect many more of them to be employed growing food and fuel in the countryside and their numbers in the megacities to decline. In the short term, however, malnutrition and starvation will increase unless some sort of world energy-rationing system is put in place (see below).
And what about us? The golden age in which we could expect our incomes to increase in real terms year after year is almost gone. From now on we have to expect the long-running trend towards lower prices to go into reverse and for our energy and food bills to take an increasing chunk of our incomes.
Whatever union negotiators do, our wages will not keep up with rises in the cost of living, and we will have less money for other things, such as buying property. As a result, house prices will fall in relation to wages, cushioning people not yet on the property ladder from the worst effects of their loss of purchasing power. Most of us, however, will gradually be forced to spend less on nonessentials and the consumer society will decline.
Richard Douthwaite is an economist and a co-founder of the Dublin-based Foundation for the Economics of Sustainability (www.feasta.org)
What do responsible governments do in wartime when a vital commodity gets scarce? Do they leave it to the market to distribute, so that the poor get none at all? No, they ration it, so that everyone gets a share.
Fossil energy is now getting scarce, and, unless the world rations oil, gas and coal use, the huge productivity gains that people can make by using these fuels for manufacturing things will enable them to out-compete workers using just the energy from human, animal and solar sources. Unless, that is, the price of fossil fuel goes to truly extraordinary heights.
Without rationing, a vicious, polarising circle could be set up, with high fossil-energy users earning more than low fossil- energy users. This could enable the high users to continue to buy and use the lion's share of earth's remaining energy stocks until the point were reached at which the low users could not afford to buy fossil fuel at all, not even for oil lamps at night.
What form should rationing take to avert this danger? Feasta, the NGO through which I do a lot of my work, suggests that, rather than ration fossil fuels themselves, governments should ration the right to emit the greenhouse gases they release when they are burned. It argues that the very limited capacity of the atmosphere to accept further greenhouse emissions without causing a climate catastrophe should be divided equally among the world's adult population and issued to us individually as a human right.
Each year we would each receive a certificate showing our share of the total amount of emissions the world community had decided it could risk releasing that year. We would then take our certificates to the bank and sell them at the going rate, just as if they were foreign currency. The banks would consolidate the certificates and sell them on to fossil-fuel producers, who would need to acquire enough of them to cover the emissions from their output. You can find more about this at www.capandshare.org.
The certificates would not only ensure that the world hit whatever emissions target it set for itself but also give the poorest people in the world something to sell, to help offset the higher cost of their food and fuel. As the world's fossil-fuel use was progressively restricted, their share of the global emissions would become worth more and more. The polarising effects of differences in energy use would be lessened, and a fairer world should come about.
THE ARGUMENT FOR RATIONING
What do responsible governments do in wartime when a vital commodity gets scarce? Do they leave it to the market to distribute, so that the poor get none at all? No, they ration it, so that everyone gets a share.
Fossil energy is now getting scarce, and, unless the world rations oil, gas and coal use, the huge productivity gains that people can make by using these fuels for manufacturing things will enable them to out-compete workers using just the energy from human, animal and solar sources. Unless, that is, the price of fossil fuel goes to truly extraordinary heights.
Without rationing, a vicious, polarising circle could be set up, with high fossil-energy users earning more than low fossilenergy users. This could enable the high users to continue to buy and use the lion's share of earth's remaining energy stocks until the point were reached at which the low users could not afford to buy fossil fuel at all, not even for oil lamps at night.
What form should rationing take to avert this danger? Feasta, the NGO through which I do a lot of my work, suggests that, rather than ration fossil fuels themselves, governments should ration the right to emit the greenhouse gases they release when they are burned. It argues that the very limited capacity of the atmosphere to accept further greenhouse emissions without causing a climate catastrophe should be divided equally among the world's adult population and issued to us individually as a human right.
Each year we would each receive a certificate showing our share of the total amount of emissions the world community had decided it could risk releasing that year. We would then take our certificates to the bank and sell them at the going rate, just as if they were foreign currency. The banks would consolidate the certificates and sell them on to fossil-fuel producers, who would need to acquire enough of them to cover the emissions from their output. You can find more about this at www.capandshare.org.
The certificates would not only ensure that the world hit whatever emissions target it set for itself but also give the poorest people in the world something to sell, to help offset the higher cost of their food and fuel. As the world's fossil-fuel use was progressively restricted, their share of the global emissions would become worth more and more. The polarising effects of differences in energy use would be lessened, and a fairer world should come about.